Hawley v. Skradski , 304 Neb. 488 ( 2019 )

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
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Nebraska Supreme Court Advance Sheets
304 Nebraska Reports
HAWLEY v. SKRADSKI
Cite as 304 Neb. 488
Kim Hawley, appellant, v.
John Skradski, appellee.
___ N.W.2d ___
Filed November 15, 2019. No. S-18-849.
1. Judgments: Jurisdiction: Appeal and Error. When a jurisdictional
issue does not involve a factual dispute, determination of a jurisdictional
issue is a matter of law which requires an appellate court to reach a
conclusion independent from the trial court’s; however, when a deter-
mination rests on factual findings, a trial court’s decision on the issue
will be upheld unless the factual findings concerning jurisdiction are
clearly incorrect.
2. Actions: Parties: Standing. Whether a party who commences an action
has standing and is therefore the real party in interest presents a jurisdic-
tional issue.
3. Jurisdiction: Standing. Because the requirement of standing is fun-
damental to a court’s exercise of subject matter jurisdiction, either a
litigant or a court can raise the question of standing at any time.
4. Standing. The stage of the litigation in which a party claims that
its opponent lacks standing affects how a court should dispose of
the claim.
5. Standing: Pleadings: Words and Phrases. If a motion challenging
standing is made at the pleadings stage, it is considered a “facial chal-
lenge” and a court will review the pleadings to determine whether there
are sufficient allegations to establish the plaintiff’s standing.
6. Standing: Jurisdiction: Pleadings: Evidence: Proof: Words and
Phrases. If a motion challenging standing, and thus the court’s subject
matter jurisdiction, is raised after the pleadings stage and the court holds
an evidentiary hearing and reviews evidence outside the pleadings, it is
considered a “factual challenge” and the party opposing the challenge
must offer evidence to support its burden of establishing subject mat-
ter jurisdiction.
7. Jurisdiction: Pleadings: Appeal and Error. Where the trial court’s
decision on a question of subject matter jurisdiction is based on a factual
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Nebraska Supreme Court Advance Sheets
304 Nebraska Reports
HAWLEY v. SKRADSKI
Cite as 304 Neb. 488
challenge, the court’s factual findings are reviewed under the clearly
erroneous standard. But aside from any factual findings, the trial court’s
ruling on subject matter jurisdiction is reviewed de novo, because it
presents a question of law.
8. Actions: Parties. Neb. Rev. Stat. § 25-301 (Reissue 2016) establishes
an absolute requirement that all actions be brought in the name of the
real party in interest, and the only allowable exceptions to this rule are
set forth in Neb. Rev. Stat. § 25-304 (Reissue 2016).
9. ____: ____. Construed together, Neb. Rev. Stat. § 25-304 (Reissue
2016) and Neb. Rev. Stat. § 25-302 (Reissue 2016) permit an assignee
of a chose in action to maintain an action thereon in the assignee’s own
name when the assignment being sued upon is in writing.
10. Jurisdiction. Whether a court has subject matter jurisdiction is a thresh-
old issue that should be resolved prior to an examination of the merits.
11. Actions: Parties: Standing. Because Neb. Rev. Stat. § 25-304 (Reissue
2016) allows assignees of choses in action to “sue on any claim assigned
in writing,” evidence of an oral assignment of a chose in action is insuf-
ficient as a matter of law to confer standing to sue on the assignee.
12. Jurisdiction: Appeal and Error. When a lower court does not gain
jurisdiction over the case before it, an appellate court also lacks the
jurisdiction to review the merits of the claim.
Appeal from the District Court for Douglas County: James
T. Gleason, Judge. Vacated and dismissed.
Scott A. Lautenbaugh, of Law Offices of Scott Lautenbaugh,
for appellant.
Michael J. O’Bradovich, P.C., for appellee.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke,
Papik, and Freudenberg, JJ.
Stacy, J.
Kim Hawley brought this civil action against John Skradski
for breach of contract, conversion, and tortious interference
with a business relationship or expectation. A jury trial was
held, and at the close of Hawley’s case in chief, the district
court granted Skradski’s motion for a directed verdict. Hawley
appeals. Because we find Hawley lacked standing to bring the
action in his own name, we vacate the district court’s judgment
and dismiss the appeal.
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Nebraska Supreme Court Advance Sheets
304 Nebraska Reports
HAWLEY v. SKRADSKI
Cite as 304 Neb. 488
BACKGROUND
Hawley’s Complaint
Hawley filed this lawsuit against Skradski in the district
court for Douglas County on October 28, 2015. Hawley is the
only named plaintiff. Hawley’s complaint alleged he purchased
a heating and air conditioning (HVAC) business from an entity
affiliated with Skradski in 2008 and operated that HVAC busi-
ness on premises leased from Skradski. The complaint alleged
that in July 2011, Hawley ceased operating the HVAC business
and vacated the leased premises. It further alleged that there-
after, Skradski “took possession of the premises” and “[u]nbe-
knownst to [Hawley] and without his authorization, [Skradski]
began operating the business he had sold to [Hawley]” using
the same premises. Hawley alleged that Skradski converted
“payments, work orders, business lists, contacts, contracts and
the like, and converted various other assets of the business
to his use” and that this “caused the value of the business to
decrease.” Hawley sought to recover damages in an unspeci-
fied amount, relying on theories of breach of contract, con-
version, and tortious interference with a business relationship
or expectation.
Skradski’s Answer
Skradski’s answer generally denied the allegations of the
complaint and specifically denied having sold the HVAC
business to Hawley individually. Instead, Skradski’s answer
alleged that in 2008, he sold the HVAC business to KNR
Capital Corp. (KNR) and leased the business premises to the
same corporate entity. In addition, Skradski’s answer alleged
that Hawley’s complaint failed to state a claim upon which
relief could be granted and that Hawley lacked standing to
assert the claims.
Trial Evidence
A jury trial was held over a 2-day period in August 2018.
Among the evidence offered and received was a copy of the
2008 asset purchase agreement pertaining to the sale of the
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Nebraska Supreme Court Advance Sheets
304 Nebraska Reports
HAWLEY v. SKRADSKI
Cite as 304 Neb. 488
HVAC business. The asset purchase agreement showed the
HVAC business was purchased by KNR, and not by Hawley
individually.
During trial, Hawley testified that when the asset purchase
agreement was signed, he and his wife each owned between
1 and 2 percent of KNR and the remainder was held by what
Hawley described as a “401K rollover” holding company that
was “part of [a] trust” that Hawley was “in charge of.” Hawley
later testified that when he and his wife subsequently divorced,
her ownership share in KNR was “essentially nullif[ied],”
although he did not fully explain how that occurred.
KNR operated the HVAC business from 2008 through July
2011. According to Hawley, he closed the HVAC business after
learning the general manager had been “padding his numbers,”
resulting in a shortfall of several hundred thousand dollars.
After closing the HVAC business, Hawley, as KNR’s president,
entered into a contract to sell the HVAC business to McCarthy
Heating & Air Conditioning Service, Inc. (McCarthy).
Hawley testified that before closing on the contract to sell
the HVAC business to McCarthy, he and the president of
McCarthy visited the HVAC business premises to examine
the inventory. During that October 2011 visit, Hawley saw
people who had been employed by the HVAC business during
the time he operated it, and it appeared to Hawley they were
operating an HVAC business from the premises. Hawley also
testified that while he was on the premises, he saw a work
chart, evidence of billings, an employee gathering materials
to return to a vendor for credit, and a compact disc copy of
the HVAC business’ customer database. Skradski and other
witnesses generally refuted Hawley’s account of what he saw
during the October visit to the business premises. And Skradski
denied operating an HVAC business from the premises during
October 2011.
Hawley testified that as a result of the October visit,
McCarthy learned KNR had suffered a “substantial loss of the
inventory” and the sale price for the HVAC business dropped
from $100,000 to $50,000.
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Nebraska Supreme Court Advance Sheets
304 Nebraska Reports
HAWLEY v. SKRADSKI
Cite as 304 Neb. 488
During his direct examination, Hawley was asked, “What
eventually happened to [KNR]?” and he replied, “We eventu-
ally closed it down . . . and transferred the remaining assets to
myself.” He testified that the remaining assets were “the rights
to pursue this case” against Skradski, and then reiterated that
he “assigned that to myself.” He offered no further details on
how the alleged assignment from KNR to Hawley occurred.
Oral Motion to Amend Pleadings
On the morning of the second day of trial, after offering
testimony about an assignment from KNR, Hawley made an
oral motion to “amend the pleadings to comport with the evi-
dence.” Hawley sought to amend his complaint to add an alle-
gation that KNR assigned its claim against Skradski to Hawley.
Alternatively, Hawley sought to add KNR as a party plaintiff.
Skradski opposed the requested amendments on grounds they
were untimely.
The court refused Hawley’s request to add KNR as a party
plaintiff. It reasoned there was evidence that KNR made an
“oral assignment” to Hawley of any claim it had against
Skradski, and it found this evidence tended to show that
Hawley, and not KNR, was the proper plaintiff. But the court
granted Hawley’s motion to conform the pleadings to the evi-
dence for purposes of alleging an assignment from KNR to
Hawley of any claim KNR had against Skradski. After indicat-
ing on the record that such an amendment would be allowed,
the court instructed Hawley’s counsel, “You may file an appro-
priate pleading,” to which counsel replied, “Thank you, [y]our
honor.” No amended pleading appears in our record, but the
parties thereafter treated the assignment from KNR to Hawley
as having been raised in the operative pleading.1
Motion for Directed Verdict
After the close of Hawley’s case in chief, Skradski moved
for a directed verdict, arguing Hawley had failed to meet his
1
See Neb. Ct. R. Pldg. § 6-1115.
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Nebraska Supreme Court Advance Sheets
304 Nebraska Reports
HAWLEY v. SKRADSKI
Cite as 304 Neb. 488
burden of proof on all three theories of recovery: breach of
contract, conversion, and tortious interference with a business
relationship or expectation. The district court agreed, and with-
out expressly ruling on whether Hawley had proved standing to
bring suit in his own name, the court granted the directed ver-
dict and dismissed the action. Hawley filed this timely appeal,
which we moved to our docket on our own motion.
ASSIGNMENTS OF ERROR
Hawley assigns, restated, that the district court erred in (1)
granting Skradski’s motion for directed verdict, (2) finding
there was insufficient evidence of conversion, and (3) finding
there was insufficient evidence of tortious interference with a
business relationship or expectation.
STANDARD OF REVIEW
[1] When a jurisdictional issue does not involve a factual
dispute, determination of a jurisdictional issue is a matter of
law which requires an appellate court to reach a conclusion
independent from the trial court’s; however, when a determi-
nation rests on factual findings, a trial court’s decision on the
issue will be upheld unless the factual findings concerning
jurisdiction are clearly incorrect.2
ANALYSIS
Standing and Real Party in Interest
[2,3] Although neither party raises the issue on appeal,
we must first determine whether Hawley has standing and is
the real party in interest for purposes of bringing this action
against Skradski. Whether a party who commences an action
has standing and is therefore the real party in interest presents
a jurisdictional issue.3 Because the requirement of standing is
fundamental to a court’s exercise of subject matter jurisdiction,
2
Jacobs Engr. Group v. ConAgra Foods, 301 Neb. 38, 917 N.W.2d 435
(2018).
3
Id.
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304 Nebraska Reports
HAWLEY v. SKRADSKI
Cite as 304 Neb. 488
either a litigant or a court can raise the question of standing at
any time.4
[4-6] The stage of the litigation in which a party claims that
its opponent lacks standing affects how a court should dispose
of the claim.5 If a motion challenging standing is made at the
pleadings stage, it is considered a “facial challenge” and a
court will review the pleadings to determine whether there are
sufficient allegations to establish the plaintiff’s standing.6 But
if the challenge to standing, and thus the court’s subject matter
jurisdiction, is raised after the pleadings stage and the court
holds an evidentiary hearing and reviews evidence outside the
pleadings, it is considered a “factual challenge” and the party
opposing the challenge must offer evidence to support its bur-
den of establishing subject matter jurisdiction.7
[7] Where the trial court’s decision on a question of subject
matter jurisdiction is based on a factual challenge, the court’s
factual findings are reviewed under the clearly erroneous stan-
dard.8 But aside from any factual findings, the trial court’s rul-
ing on subject matter jurisdiction is reviewed de novo, because
it presents a question of law.9
Here, the district court heard evidence on the issue of
Hawley’s standing to bring suit in his own name. We there-
fore review its factual findings on this jurisdictional issue for
clear error, and we review de novo the ultimate question of
Hawley’s standing.
Real Party in Interest Statutes
At trial, Hawley admitted it was KNR that purchased the
HVAC business from Skradski and sold the HVAC business
4
Id.
5
Id.
6
See id.
7
See id.
8
See id.
9
See Bohaboj v. Rausch, 272 Neb. 394, 721 N.W.2d 655 (2006).
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HAWLEY v. SKRADSKI
Cite as 304 Neb. 488
to McCarthy. Hawley testified that he was one of several
shareholders of KNR when it purchased the HVAC business
in 2008 and that he was the sole shareholder of KNR when
it sold the HVAC business in 2011. But Hawley did not bring
this action in his capacity as an officer of KNR—he brought
it individually. And even where one person owns all the stock
of a corporation, property belonging to the corporation does
not become the property of such person.10 On this record, any
chose in action against Skradski belonged to KNR, not to
Hawley individually. Hawley apparently recognized this and
claimed to be prosecuting this action as the assignee of KNR’s
chose in action against Skradski.
[8] Nebraska’s real party in interest statute provides that
“[e]very action shall be prosecuted in the name of the real
party in interest except as otherwise provided in section
25-304.”11 We have recognized that § 25-301 establishes an
absolute requirement that all actions be brought in the name
of the real party in interest and that the only allowable excep-
tions to this rule are set forth in Neb. Rev. Stat. § 25-304
(Reissue 2016).12
[9] Section 25-304 states in relevant part: “Assignees of
choses in action assigned for the purpose of collection may
sue on any claim assigned in writing.” A related statute, Neb.
Rev. Stat. § 25-302 (Reissue 2016), states: “The assignee of a
thing in action may maintain an action thereon in the assign-
ee’s own name and behalf, without the name of the assignor.”
Construing these statutes together, Nebraska law permits an
assignee of a chose in action to maintain an action thereon
in the assignee’s own name when the assignment being sued
upon is in writing. As such, Hawley could establish standing
to bring this action in his own name, and thus show the court
10
See State ex rel. Sorensen v. Weston Bank, 125 Neb. 612, 251 N.W. 164
(1933).
11
Neb. Rev. Stat. § 25-301 (Reissue 2016).
12
Orr v. Knowles, 215 Neb. 49, 337 N.W.2d 699 (1983).
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HAWLEY v. SKRADSKI
Cite as 304 Neb. 488
had subject matter jurisdiction, if he proved by a preponder-
ance of the evidence13 the existence of a written assignment
under § 25-304.14
Hawley Failed to Prove Written
Assignment Under § 25-304
The only evidence of an assignment from KNR was
Hawley’s testimony, and it was sparse. During Hawley’s direct
examination, he was asked, “What eventually happened to
[KNR]?” and he responded, “We eventually closed it down . . .
and transferred the remaining assets to myself.” Hawley then
explained that the only assets that were transferred were “the
rights to pursue this case,” and again said he “assigned that”
to himself. Hawley did not produce a written assignment from
KNR, and his testimony did not expressly reference a writ-
ten assignment.
[10] After hearing Hawley’s testimony about the assignment,
the district court found KNR had made an “oral assignment”
to Hawley of any claim it had against Skradski. Although the
court did not expressly rule on whether the oral assignment
gave Hawley the requisite standing to support the exercise of
subject matter jurisdiction, it found Hawley was the proper
plaintiff, and it reached the merits of Hawley’s claims and
granted Skradski’s motion for a directed verdict on those
claims. Whether a court has subject matter jurisdiction is a
threshold issue that should be resolved prior to an examination
of the merits,15 and we therefore conclude the court implicitly
found it had subject matter jurisdiction.
13
See, Wetovick v. County of Nance, 279 Neb. 773, 782 N.W.2d 298 (2010);
Pallas v. Dailey, 169 Neb. 533, 100 N.W.2d 197 (1960).
14
See Archer v. Musick, 147 Neb. 1018, 1027, 25 N.W.2d 908, 913 (1947)
(“‘assignees of choses in action assigned for the purpose of collection’”
are considered real parties in interest and authorized to maintain actions
thereon as such).
15
See, generally, Holmstedt v. York Cty. Jail Supervisor, 275 Neb. 161, 745
N.W.2d 317 (2008).
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HAWLEY v. SKRADSKI
Cite as 304 Neb. 488
As noted, we review factual findings related to the court’s
subject matter jurisdiction for clear error16 and the court’s
ultimate determination as to subject matter jurisdiction de
novo.17 On this record, it was not clearly erroneous to find
that KNR made an oral assignment to Hawley of its claim
against Skradski.
[11] But because § 25-304 allows assignees of choses in
action to “sue on any claim assigned in writing,” we find on
de novo review that evidence of an oral assignment of a chose
in action is insufficient as a matter of law to confer standing
to sue on the assignee. Because Hawley failed to prove he
was the assignee under a written assignment from KNR of a
chose in action against Skradski, Hawley failed to prove his
standing to bring this suit in his own name under § 25-304. As
such, the district court lacked subject matter jurisdiction over
the cause.
CONCLUSION
[12] When a lower court does not gain jurisdiction over the
case before it, an appellate court also lacks the jurisdiction to
review the merits of the claim.18 We thus vacate the district
court’s judgment and dismiss the appeal for lack of subject
matter jurisdiction.
Vacated and dismissed.
16
See Jacobs Engr. Group, supra note 2.
17
See Bohaboj, supra note 9.
18
State ex rel. Rhiley v. Nebraska State Patrol, 301 Neb. 241, 917 N.W.2d
903 (2018).